Perceived Trust and Confidence for Cryptocurrency Adoption: What Lies Ahead?

Perceived Trust and Confidence for Cryptocurrency Adoption: What Lies Ahead?

Ewilly Jie Ying Liew (Monash University, Malaysia), Wei Li Peh (Monash University, Malaysia), and Zhuan Kee Leong (Monash University, Malaysia)
DOI: 10.4018/978-1-7998-9035-5.ch014
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This chapter seeks to examine the influence of public perceptions of trust in people and confidence in institutions on cryptocurrency adoption, taking into account the individual-level demographic factors and the regional-level contextual factors. Data is obtained from three large-scale international surveys and national databases and analyzed using R software. The multivariate results demonstrate that individuals' public perceptions of trust and confidence significantly contribute to cryptocurrency adoption. Lower perceived trust in people and higher perceived confidence in civil service and international regulatory bodies increase cryptocurrency adoption, while perceived confidence in political and financial institutions discourages cryptocurrency adoption. Additionally, the univariate results find significant comparisons of gender and perceived trust differences on the predictors of cryptocurrency adoption. This chapter discusses and provides insights on the social impact and future of cryptocurrency adoption, particularly among the upper- and lower-middle-income countries.
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Cryptocurrencies have become frequent headlines in the official press and unofficial social media platforms. Since 2009, cryptocurrencies have been increasingly recognized as an emerging channel for private wealth accumulation despite the risks of investors trading in highly volatile markets and often under unfavorable government scrutiny (Atkins et al., 2021). Cryptocurrency markets, the most prominent being Bitcoin and Ethereum, have envisioned a decentralized blockchain ecosystem to facilitate cryptographically secured peer-to-peer transactions for digital inclusion (Lai & Liew, n.d.). Adopting a decentralized blockchain ecosystem that promises high returns for private wealth accumulation in highly volatile and risky cryptocurrency markets may be associated with a more complex interplay of social interactions with people and institutions.

Over the last two decades, the socio-economic landscape of the world has changed drastically due to rapid technological development and the rise of millennial generations who are native netizens. The unprecedented coronavirus (COVID-19) pandemic and various lockdown containment measures have plunged the global economy into a deep recession and have plummeted per capita income, forcing millions into extreme poverty (World Bank, 2021c). The effects of socio-economic disruption are magnified in countries that are more vulnerable to external shocks. Within the countries, perceived trust in people and confidence in institutions become more crucial during this pandemic to maintain social order and restore the socio-economic stability of society. Meanwhile, any erosion of trust in the government, political parties, or other public agencies is likely to compromise public confidence in their ability to maintain wealth creation and wellbeing development opportunities for the people (Morselli et al., 2015).

Current trends and extant research indicate that the world population is increasingly attracted to the cryptocurrency markets, both rich and poor. Traditionally, the financial markets tend to favor the high-income regions and marginalize the lower-income regions (Honohan, 2008). However, studies have shown that cryptocurrencies have a positive utility in regions where domestic currencies are weak and when people are desperate for a renewed, reachable, alternative investment (Ellsworth, 2021). The global cryptocurrency adoption has skyrocketed to over 880% since the pandemic with pervasive peer-to-peer transaction volume, mainly under US$10,000 worth of cryptocurrency, coming from developing countries that tend to limit outbound currency transfer or face domestic currency devaluation (Chainalysis Team, 2021). Past studies and the current digital phenomenon seem to indicate that some regions may have a better take-up rate for cryptocurrency adoption than others. A plausible reason could be the different levels of subjective public perceptions related to trusting other people and having confidence in multilateral institutions such as mass media, political, financial, private, and public institutions.

Therefore, this chapter seeks to answer an overarching research question as follows: “do trust in people and confidence in institutions contribute to cryptocurrency adoption?” The following two research objectives are addressed:

  • 1.

    To examine whether public perceptions of trust in people and confidence in institutions will contribute to cryptocurrency adoption.

  • 2.

    To identify whether contextual factors of the individuals (age, gender) and countries (income inequality, national economic development, region, income level classification) will influence cryptocurrency adoption.

Using large-scale international surveys and national databases, our empirical model employs quantitative analysis to synthesize subjective and objective measures investigating the social impact of perceived trust and perceived confidence on cryptocurrency adoption. Results derived from the individual and regional levels of analysis provide insightful discussions towards a generalizable understanding of the future of cryptocurrency adoption in the world.

Key Terms in this Chapter

Bitcoin: Bitcoin is a decentralized cryptocurrency. The key idea is using peer to peer transaction where there is no middle party needed to facilitate the transaction. In the world of cryptocurrency, Bitcoin is known as “digital gold” which has store of value because of it limited supply and predicted increasing demand over time.

Netizens: A keen or habitual user of the Internet, or an active participant in the online community of the Internet.

HODL: Hold on for dear life is one of the strategy investors used in the cryptocurrency market. HODL-ers is those investors that buys and keep their cryptocurrency for a long time despite the volatility in the market.

Cryptocurrency: Digital currency that utilize blockchain technology. In general, cryptocurrency in the market focus on three area: decentralized, scalability and security.

Trust: The degree to which an individual believes that he or she needs to be very careful in dealing with other people in the country or that they can be trusted.

Axie Infinity: A blockchain project where users can earn while they play. Inspired by games like Pokemon and Tamagotchi, it allows players to collect, breed, battle, and trade token-based creatures known as Axies.

Technopreneurship: A business concerned with the use of computers or digital technology, with the aim to revolutionize the prevailing economic order.

Ethereum: Ethereum is an open source decentralized blockchain system. Ethereum in addition of smart contracts is famous for the ability to host other cryptocurrencies using ERC-20 standard. It is one of the widely used cryptocurrency platform in which users can refer to it as “electricity” for the cryptocurrency market.

Confidence: The degree to which an individual believes that he or she can have a great deal of confidence (or none at all) towards multilateral organizations such as public agencies and external institutions in the country.

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